The art and science of credit union Relevance

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As financial services organizations seek to create competitive advantage through environmental, social and corporate (ESG) governance, credit unions have increased the pressure to prove their worth to their members and communities through well-known principles of cooperation. This is both an art and a science. The art is found both in how the culture of the board and business is promoted and in the intuition of the participants developing the strategy, while the science lies in the effectiveness of the data deployment and in the way in which data shapes strategic choices.

Art: Culture of the Council and the Credit Union

The credit cooperative system finds itself in a market full of competitors: from big banks to new banks to fintechs to the concept of metaverse, the list is endless. Identifying, selecting and developing financially sustainable winning strategies amidst huge, well-capitalized and incredibly agile competitors while consumer behavior is constantly changing is not easy. This landscape can seem very difficult for the board of directors and leadership teams to navigate strategically.

The ability to begin identifying winning strategies is fostered through a supportive culture that encourages solid strategic thinking and a thoughtful consideration of business strategy in the regular activities of the board and leadership teams. This doesn’t happen naturally. It takes time, effort and attention to promote important Council standards and expectations and to deliberately cultivate a strategic culture.

Culture can be described as a stabilizing influence between the individual members of a board and the dynamics of the board. The group shapes the individual behavior and the individual shapes the group. In a board of a credit union, knowingly or not, individuals begin to adopt the rules (written or unwritten) of the board over time. This means that the credit union culture can change to become more strategic over time. To deliberately influence culture, board presidents need to pay attention to the following: individual competence, board dynamics, and systematic processes.

1. Individual competence

Each individual must become a competent strategic thinker to promote strategic culture in their credit union. This implies that they have a wide range of knowledge and skills related to the organization they are governing or managing. Individuals must understand the internal workings of the company, including the strengths, weaknesses, key risk areas and external factors that influence the success of the credit union.

2. Dynamics of the card

Boards of directors can foster strategic culture through their common engagement in strategic thinking. This can be formally acquired through the Director’s Terms of Reference, which are ideally reviewed annually with the entire board and are part of the hiring process for new directors. Directors and leaders need to be able to share bold / opposing points of view, and therefore boards of directors need to be very aware of groupthink. Groupthink is generally encouraged by subtle behaviors / gestures at the board table: rolling your eyes or folding your arms when managers discuss something contrary to the group’s way of thinking. It is also aided by more obvious actions like stopping someone from talking or laughing at a raised point. It is imperative that the voices of all directors have an equal platform to speak and that different points of view are encouraged.

3. Systematic processes

The inclusion of systematic processes at the board table formalizes the commitment to strategic thinking. Systematic processes include council policies, which are reviewed annually and strengthened by the council chairman; a facilitator for strategic level discussions who can prompt the board to think differently; a board agenda that fosters strategic discussion (including the inclusion of strategy-related deliberation questions); a template used to present information to the board for a decision (for example, a business case); minimum annual manager training requirements and routine assessments of board dynamics / meeting effectiveness.

Science: strategy

The purpose of strategy development, execution and evaluation is to remain relevant to the members, employees, communities and other key stakeholders served by your credit union. To develop strategy, directors and executives must refine strategic thinking.

An easily digestible framework for strategic thinking is the three Cs: Contemplate, Connect, and Committee.

Contemplate: To gather information from a wide variety of sources. Consider where you get your information: colleagues, social media, news organizations, podcasts, research institutes, industry experts, data presented by management, etc.

Connect: To take the information you have discovered and connect it with the credit union, as well as being able to clearly articulate your thoughts with others around the board table. Consider how important it is for you to not only generate ideas but to be able to explain ideas to your colleagues.

To commit: To make decisions on resource allocation when it comes time to set the strategy.

Data strategy

A newly discovered tool in the strategic toolbox of credit unions is data. On average, credit unions have between 60 and 100 data sources. The challenge is to leverage this data to achieve the company’s strategic objectives. This is where a solid data strategy can be a game changer. The primary function of a credit union data strategy is to align and support the organization’s strategy. The data strategy supports the vision of data. The critical elements of a data strategy are data vision, use case, maturity, consumption and adoption in the workplace.

Data vision: what is your data and why?

Creating a business data vision statement is similar to creating a mission statement for a credit union. The vision and ideation of data both revolve around the exploration of a future world. Start with the end in mind. Imagine the credit union after the data has been linked and insights have been generated. Consider how data is transforming members’ lives. What is the status of the cooperative / member relationship?

Once the vision has been evaluated, the data use case is the next component to create in the data strategy. A use case is the business problem (related to members or employees) that a credit union uses data to solve.

Data maturity

Many credit unions assume that once their use case is established, they have set up their data strategy. This is a mistake. As credit unions are establishing data capacity, they are also developing a data-mature organization. Data maturity is the extent to which an organization uses the data it produces. One of the most overlooked areas in the data is business maturity. Many organizations think that data maturity will occur organically. This is not true. Data is an incredibly solid resource and requires focus and attention.

Consumption of data

Data consumption depends on the credit union’s “data culture” and requires leadership, training and adherence at all levels of the business. An effective data culture is one in which everyone in the organization leverages data in their decision-making processes. Employees use it, understand that data has potential and limitations, and see data and data analytics as a positive experience rather than a hindrance.

Workplace adoption

Workplace adoption is most likely the ultimate destination for data transformation. When an organization has the vision, strategy, and resources to achieve its data transformation goals, by default of transformation, it creates new capabilities and, ideally, a new culture. Workplace adoption is not an organic development. Successful organizations exercise diligently to foster new capabilities and culture, continuing the trajectory initiated by the data transformation plan.

A credit union has gained workplace adoption when data fosters greater strategic skills. As with any new functionality, joining the member and the data must be practiced repeatedly in a continuous loop. The member is the beneficiary of a work environment where data is exploited, as the data will help the member anticipate and better understand their needs and relationship with their credit union.

Mastering the art and science of the relevance of credit unions is difficult, but not insurmountable. To thrive and survive in the digital age, credit unions must focus their efforts on developing a strategic culture around the board and management team. This, coupled with a powerful data strategy, will give credit unions a competitive edge.

Anne Legg is the founder of THRIVE Strategic Services, a San Diego, California-based company that assists credit unions with data transformation and author of “Big Data / Big Climb,” a credit union playbook for data transformation.

Anne Leg Anne Leg

Miranda Flury is the president of Hawkeye Strategies Inc., a consulting firm headquartered in Fort St. John, British Columbia, Canada, serving co-operative boards and executives. She is also a public speaker on governance and strategy and director of the board of directors of Federated Cooperatives Limited in Saskatoon, Saskatchewan, Canada.

Miranda Flury Miranda Flury

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